Explanation

Depreciation is the accounting process of gradually converting the cost of a fixed asset into expenses over its useful life. Depreciation is an accounting method that spreads out the cost of a tangible asset over its useful life. It’s used to match costs to revenues. Depreciation occurs because assets decline in value over time. Depreciation expense is the portion of the cost of an asset that has been depreciated for a single period. Depreciation is part of the accounting process for fixed assets, which also includes: Entering the asset’s purchase cost Periodically depreciating the cost over the asset’s useful life Eventually disposing of the asset and removing it from the books Depreciation, depletion, and amortization (DD&A) is an accounting technique that companies use to gradually expense various different resources of economic value over time.